Alternatives to Political SystemsEconomicsFinancial Management

A Better Way to Make Money

Here’s how we could solve the credit crunch without giving anything to the banks.

by George Monbiot – journalist, author, academic and environmental and political activist

In Russell Hoban’s novel Riddley Walker, the descendents of nuclear holocaust survivors seek amid the rubble the key to recovering their lost civilisation. They end up believing that the answer is to re-invent the atom bomb. I was reminded of this when I read the government’s new plans to save us from the credit crunch. It intends – at gob-smacking public expense – to persuade the banks to start lending again, at levels similar to those of 2007. Isn’t this what caused the problem in the first place? Is insane levels of lending really the solution to a crisis caused by insane levels of lending?

Yes, I know that without money there’s no business, and without business there are no jobs. I also know that most of the money in circulation is issued, through fractional reserve banking, in the form of debt. This means that you can’t solve one problem (a lack of money) without causing another (a mountain of debt). There must be a better way than this.

This isn’t my subject and I am venturing way beyond my pay grade. But I want to introduce you to another way of negotiating a credit crunch, which requires no moral hazard, no hair of the dog and no public spending. I’m relying, in explaining it, on the former currency trader and central banker Bernard Lietaer.

In his book The Future of Money, Lietaer points out – as the government did yesterday – that in situations like ours everything grinds to a halt for want of money(1). But he also explains that there is no reason why this money should take the form of sterling or be issued by the banks. Money consists only of “an agreement within a community to use something as a medium of exchange.” The medium of exchange could be anything, as long as everyone who uses it trusts that everyone else will recognise its value. During the Great Depression, businesses in the United States issued rabbit tails, seashells and wooden discs as currency, as well as all manner of papers and metal tokens. In 1971, Jaime Lerner, the mayor of Curitiba in Brazil, kick-started the economy of the city and solved two major social problems by issuing currency in the form of bus tokens. People earned them by picking and sorting litter: thus cleaning the streets and acquiring the means to commute to work. Schemes like this helped Curitiba become one of the most prosperous cities in Brazil.

But the projects which have proved most effective were those inspired by the German economist Silvio Gesell, who became finance minister in Gustav Landauer’s doomed Bavarian republic. He proposed that communities seeking to rescue themselves from economic collapse should issue their own currency. To discourage people from hoarding it, they should impose a fee (called demurrage), which had the same effect as negative interest. The back of each banknote would contain 12 boxes. For the note to remain valid, the owner had to buy a stamp every month and stick it in one of the boxes. It would be withdrawn from circulation after a year. Money of this kind is called stamp scrip: a privately-issued currency which becomes less valuable the longer you hold onto it.

One of the first places to experiment with this scheme was the small German town of Schwanenkirchen. In 1923, hyperinflation had caused a credit crunch of a different kind. A Dr Hebecker, owner of a coalmine in Schwanenkirchen, told his workers that if they wouldn’t accept the coal-backed stamp scrip he had invented – the Wara – he would have to close the mine. He promised to exchange it, in the first instance, for food. The scheme immediately took off. It saved both the mine and the town. It was soon adopted by 2000 corporations across Germany. But in 1931, under pressure from the central bank, the ministry of finance closed the project down, with catastrophic consequences for the communities which had come to depend on it. Lietaer points out that the only remaining option for the German economy was ruthless centralised economic planning. Would Hitler have come to power if the Wara and similar schemes had been allowed to survive?

The Austrian town of Wörgl also tried out Gesell’s idea, in 1932. Like most communities in Europe at the time, it suffered from mass unemployment and a shortage of money for public works. Instead of spending the town’s meagre funds on new works, the mayor put them on deposit as a guarantee for the stamp scrip he issued. By paying workers in the new currency, he paved the streets, restored the water system and built a bridge, new houses and a ski jump. Because they would soon lose their value, Wörgl’s own schillings circulated much faster than the official money, with the result that each unit of currency generated 12 to 14 times more employment. Scores of other towns sought to copy the scheme, at which point – in 1933 – the central bank stamped it out. Wörgl’s workers were thrown out of work again.

Similar projects took off at the same time in dozens of countries. Almost all of them were closed down as the central banks panicked about losing their monopoly over the control of money (just one, Switzerland’s WIR system, still exists). Roosevelt prohibited complementary currencies by executive decree, though they might have offered a faster, cheaper and more effective means of pulling the US out of the Depression than his New Deal.

No one is suggesting that we replace official currencies with local scrip: this is a complementary system, not an alternative. Nor does Lietaer propose this as a solution to all economic ills. But even before you consider how it could be improved through modern information technology, several features of Gesell’s system grab your attention. We need not wait for the government or the central bank to save us: we can set this system up ourselves. It costs taxpayers nothing. It bypasses the greedy banks. It recharges local economies and gives local businesses an advantage over multinationals. It can be tailored to the needs of the community. It does not require – as Eddie George, the former Governor of the Bank of England, insisted – that one part of the country be squeezed so that another can prosper.

Perhaps most importantly, a demurrage system reverses the ecological problem of discount rates. If you have to pay to keep your money, the later you receive your income, the more valuable it will be. So it makes economic sense, under this system, to invest long-term. As resources in the ground are a better store of value than money in the bank, the system encourages their conservation.

I make no claim to expertise. I’m not qualified to identify the flaws in this scheme, nor am I confident that I have made the best case for it. All I ask is that, if you haven’t come across it before, you don’t dismiss it before learning more. As we confront the failure of the government’s first bail-out and the astonishing costs of the second, isn’t it time we considered the alternatives?


  • Bernard Lietaer, 2001. The Future of Money. Century. London.



  1. The banknotes with stamps do work well, but unfortunately there is a small problem with them… They work too good! The idea behind this project was to create money that would rust, like iron, so that people would like to get rid of as soon as possible, and keep money in circulation. It means that it encouraged them to spend, spend, spend. The unemployment in the Austrian city decreased, but the consumption rose. For a small community that may be a good idea, but just imagine if this kind of money was introduced in USA :)

    But sure, local communities should be able to print their own money. And some already do.

    If you are intersted in Silvio Gesell’s idea, you could check out a book written by Margrit Kennedy, entitled “Interest & Inflation Free Money”. It is available for free download here:

  2. Lets start like Ron Paul suggeted to eliminate taxes on gold and
    silver. Why should money itself be taxed?
    This would begin to allow people to actually have a money that is
    a medium of exchange and store of value . Stamp schemes would seem to rob individuals who are saving for the future. There are
    public companies like ITEX that are setting up business barter
    networks that seem to have promise as well.

  3. The very word ‘economy’ has it’s origins in thrift, and the management of scarce resources.

    The Universe and our beautiful planet are definitely abundant and definitely do not exhibit any characteristics of ‘scarcity’. Only man has introduced scarcity as a concept rather than working with nature he often works against her.

    R Buckminster Fuller very eloquently describes what has really happened over the past 100 years and how ‘technology’ has for the first time ever in human history (C1971) provided the know how and the resources for everyone on planet earth to be living at a standard of living higher than any of us has ever known.

    The first step in transforming our economy is to change the ‘context’ of it from scarcity (which no longer exists) to a context of ‘abundance’ or plenty. The ‘content’ or the amount of wealth available to everyone is determined by the context.

    Another important point put by Fuller is that you can’t make money and make sense at the same time, they are mutually exclusive. For the past century or two we have focused on making money … at the expense of our environment, health, community and more.

    It is impossible to die of starvation in Australia, USA, most European countries … someone will put food in your mouth and clothes on your back. Find a JOB that needs doing and that makes sense, and trust that the Universe will provide for you and your family and watch what happens.

  4. I pounced on this issue due to the name: George, your book HEAT has changed my life!

    Alternatives to money have been done, very well, in a number of plcaes in modern times. It is called LETS: Local Employment/Energy Transfer/Trading Systems. Michael Linton in Canada started it off in about the early 70s, and it has spread in various forms around the world.

    I can remember Michael describing the need for his local currency: It is paralleled by the situation we face now… Ïmagine being on a building site, with all the materials, all the people, all the plans needed, and someone saying “We cant start, we forgot the feet and inches”. All money does is measure the producitivty of the system – it is NOT the productivity..

    Ithica Hours is a well known example of LETS. In Japan there is a system for aged care: you get credits for caring for old people in your community, and pass the credit to your aging parents where-ever they live, so they can get the care you can’t provide due to geographical separation.

    We had a similar system in an ecovillage we set up, using rocks as the name of the dollar equivalent, for all “common purpose” work. We had an additional very important sophistication of an employment services company that enabled anyone to emply anyone else, and easily “Render unto Caesar..” what was due – tax, workers comp, etc etc…

  5. Thank you very much for this. I like the idea of the stamp system. I’ve been looking into Roger James Hamilton’s wealth dynamics and it occurred to me that when he talks about the flow of money he is talking about permaculture. Just as the current food system has waste, we can waste and hoard money. We become wealthier if we allow that money to flow between us. At least that’s my understanding. You may also like to look into the American greenback dollar and the Guernsey pound, which we both fiat, but interest free and very successful. This:

    Is an excellent documentary with a good deal about the history of money.

    Another take on how to sort out the economy is . It’s basically a movement to get us all to sort out our individual economies, to get out of debt, get financially educated together as whole communities. Very empowering stuff. Knowledge is power they say.

  6. We want to make money on line with permaculture etc. You can get us on Sharing Circle Gardens to know a little more about our visions! Thank You! Birdie

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